With uncertainty growing, are there any businesses whose momentum is changing?

As we have accumulated a backlog, the economic downturn has not impacted all our business segments. On the other hand, the effects of the shortage of component have not been resolved at all, and it’s still difficult to predict when it will be eased.

The impact of component and logistics costs increase seems to be a bit larger in Q1 compared to the annual projection of two to three billion yen which you mentioned in the previous briefing.

Last year, the impact started to come in the second half of Q2, so in terms of year-on-year change, we expect that it will not have much impact on the year-on-year change in the second half of this fiscal year.

Could you tell us the impact of the component and logistics costs surge by segment?

Positioning Company accounts for approximately half of total amount, and the rest is basically divided equally between Smart Infrastructure Business and Eye Care Business. However, Eye Care Business is affected slightly more because Smart Infrastructure Business has few logistics expenses.

Looking at the sales figures by region in the consolidated financial result (Kessan Tanshin), it seems that sales growth in Europe is weaker. Could you explain why?

Europe is also doing well. The percentage of the sales to Europe decreased because the U.S. was growing much more than Europe. In addition, a shortage of component at a display plant in Germany has partially affected sales. We do not think demands were not particularly weak.

I understand the increase of work in process inventory due to a shortage of component. However, the inventory of finished goods was also increased rapidly. Could you explain the reason?

Some of the products that used to be shipped by air are switched to ocean shipment, which means it takes more time for transportation. On a non-consolidated basis, internal sales booked to subsidiaries are recognized in many cases on a consolidated basis.

I would like to have a breakdown of the growth of sales, such as impact of FX fluctuation, change in the amount of backlog and effect of price increase.

Excluding the impact of FX fluctuation, sales growth was just below 10%. Backorders increased on a local currency basis from the end of March. It is difficult to predict when it will be resolved, but I think it can be reduced after Q2. Regarding selling price adjustment, we are proceeding with the second-time increase after the first one took place last summer. The impact on Q1 was limited.

You said that operating profit decreased in Q1 due to surging component and logistics costs, which did not happen in the previous year. However, since Q2 of last year, the cost base is high because the effect of the surge already started. I think the profit turns to be uptrend from now. Is it correct understanding?

I see it that way.

Are backorders increasing in local currency?

Yes, they are.

For the whole year, profit is expected to decrease based on your plan, but the figure in Q1 was good. Is there any change in the outlook?

The outlook remains unchanged. We’re projecting that profits will be moderating as planned.

Can we expect that the impact of the decreased sales due to the lockdowns in China in Q1 will be recovered in Q2?

The effects of the lockdowns are not only on shipments but also on across-the-board activities including activities related to sales. They will not be immediately recovered in Q2.